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An economically weak China could be more dangerous than a strong one

December 8, 2011

By Gordon G. Chang Saturday, December 3, 2011 After 35 years of virtually uninterrupted growth, the Chinese economy has reached an inflection point. September may have been the peak. Since then, the signs of contraction are unmistakable: falling car sales, declining electricity consumption, plunging industrial output, collapsing property prices, you name it. There were large transfers of money out of the country in October. The deterioration has been as rapid as it was unexpected. In short, the wheels are coming off the Chinese economy. Most everyone until now has assumed that the 21st century belongs to Beijing because it would end up with the world’s largest economy. The International Monetary Fund, for instance, predicts China will surpass the United States in just five years. Analysts love to extrapolate when they think about China, yet the disturbing signals coming out of the country in the last few months suggest that the last thing we should be doing is making straight-line projections. For one thing, the country’s growth model has just about reached the limits of its effectiveness. This means economic problems will only get worse until political leaders fundamentally restructure the economy. However, it is unlikely that this restructuring can occur anytime soon. The Communist Party is entering into a once-in-a-decade political transition that will take years to complete, which means no one will have the clout to make tough decisions to change the country’s now-exhausted model. These economic problems have far-reaching geopolitical consequences because, after the Tiananmen Square massacre of 1989, the legitimacy of the party has rested primarily on the continual delivery of prosperity. And since that horrible event, the political system has continually lost effectiveness. There are many reasons for the noticeable erosion of the regime, but two stand out. First, there is a general feeling, evident throughout the country, that a one-party system is no longer appropriate for China’s advancing society. As political observers have said since the time of de Tocqueville, modernization is the inevitable and unstoppable enemy of autocrats. Second, the Communist Party has lost support due to its failure of leadership. Senior officials have colluded among themselves so that they could personally profit from their positions. As a result, reform has generally failed and corruption has gone essentially unchecked, therefore becoming an explosive issue among citizens. Because so many officials are pocketing so much money, there are now powerful forces against change in the Chinese capital and throughout the provinces. In these circumstances, blatant venality has created deep pessimism inside China about the durability of the regime. Leaders are maintaining power primarily through coercion, as the multi-year crackdown throughout the country shows. So it should come as no surprise that, as the Chinese economy falters, Beijing leaders have evidently become anxious about their legitimacy. If they cannot deliver prosperity, leaders know they must raise the flag of nationalism even higher to keep themselves in power. It is no coincidence that Jiang Zemin, the now-retired supremo, began to vilify the Japanese in the late 1990s, just when the Chinese economy stumbled toward recession. Now his successor, current leader Hu Jintao, is doing the same, but this time with far more vehemence. Hu is evidently scared. Protests — “mass incidents” in Communist lingo — have been skyrocketing, especially during the last couple years, going from around 127,000 in 2008 to perhaps as many as 280,000 in 2010. Moreover, these incidents are becoming more violent, with some becoming riots and insurrections. These days, civilian leaders are increasingly reliant on the People’s Liberation Army and the semi-military People’s Armed Police to maintain order and keep themselves in power. Due to the erosion of the authority of civilian party leaders, the Chinese regime is changing, with the military gaining power — one of the most dangerous trends in the world today. China’s flag officers, like the Japanese militarists of the 1930s, are thinking about what they can do, not what they should do. They are arrogant, bellicose and spoiling for a fight. And they are now running their own foreign policy. In the past, Beijing maintained an essentially benign foreign policy. Optimists argued that China had actually turned away from Maoist hostility and was seeking to integrate itself into the international system. In 2009, however, the country’s leaders adopted a markedly more assertive posture, taking the lead in sabotaging climate talks, vigorously pursing expansive claims in the South China and East China seas, challenging the United States at almost every turn. For instance, Chinese boats and planes harassed American vessels in international waters in March 2009, even attempting to steal a towed sonar array from an unarmed reconnaissance ship. That attempt actually constituted an act of war. The general explanation for the belligerent tone was that Chinese leaders thought no other nation could stop them. Now, with the Chinese miracle beginning to come apart, it’s possible that the country’s leaders might turn inward to solve intractable economic problems, as they did after Mao Zedong died in 1976. Yet the Communist Party took that sensible posture because it had the strong, wily, pragmatic Deng Xiaoping at the helm. Today, however, it has weak leaders — and to them, lashing out looks like the only course they can take. Because of its insecure authoritarian system, a weak China can be just as dangerous as — even more dangerous than — a strong one. The international community has to be concerned about what happens next.
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